Crude-oil prices for May carved out a dubious place in history on Monday, plunging the most on record and notching the first settlement ever in negative...
Crude-oil prices for May carved out a dubious place in history on Monday, plunging the most on record and notching the first settlement ever in negative territory.
On Monday, traders with long positions scrambled to get out amid a fear that it would be difficult to find a place to park physical oil amid a rising glut of crude.Idiosyncrasies in the price of the May contract, which expires at the end of trade on Tuesday, should come as no surprise because contracts that are about to roll off, or expire, tend to converge toward the prices for contracts for future months and therefore see volatile action near their expiration.
Bespoke put it this way: “We can’t be sure how much damage the >$40 slide in WTI did to leveraged players in the spot oil markets, but we can say with confidence that today’s price declines in June contracts caused more aggregate [profit-and-loss] pain than the May collapse into negative territory.”
It is important to note that Brent, which originates from oil fields in the North Sea between the Shetland Islands and Norway, tends to be seaborne and is therefore less vulnerable, but not immune, to storage issues, which have punished landlocked WTI, because the international grade tends to be transported via pipelines.
“That’s why pointing to more measured declines in out-month futures is whistling past the graveyard; it doesn’t change the message from the overall crude market that the industry is breaking,” Bespoke analysts wrote.
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